IMF: Ireland 'most overheated advanced economies' & that €35bn bank debt!

gurramok

http://www.rte.ie/news/2009/0624/economy.html

rte wrote:

A new report on the Irish economy says it is perhaps the most overheated of all advanced economies.

The detailed analysis by the International Monetary Fund says the collapse of tax revenue could push the deficit up to 12% of national income.

It warns Irish banks face losses of €35bn by next year.

The IMF says Ireland seemingly unstoppable economic growth of recent years masked serious problems, including the fragility of our public finances.

It says the economy was perhaps the most overheated of all advanced economies.

Generous rises in public sector wages pushed up wages elsewhere making Ireland less competitive.

In recent years the IMF says Ireland became the most expensive economy in the Eurozone with the possible exception of Luxembourg.

It says losses now faced by the banks could be about €35bn by 2010, although the bulk of that would be absorbed the banks' reserves.

The IMF is broadly supportive of the Government's NAMA project to buy back bank debt.

But it says pricing the purchase of those assets could be easier if the banks are nationalised, as not paying the right price opens the taxpayer to huge risks.

The IMF supports a property tax, cuts in public sector pay and reductions in Government spending.

And why?

Answer - The housing bubble is the reason. It has destroyed the economy for a number of years.

http://www.irishtimes.com/newspaper/frontpage/2009/0625/1224249509732.html?via=mr

IT wrote:

The fund calls for further cuts in public sector pay and employment, and a shift away from universal social welfare benefits towards assistance targeted at the most vulnerable.

- The economy will contract by about 13.5 per cent from 2008 until the end of next year.

- Unemployment will reach 15.5 per cent in 2010.

- Bank losses could rise to €35 billion by the end of 2010.

- Bank nationalisation could become necessary but not as an alternative to Nama.

- Further cuts in the public service wage bill likely to be inevitable. A review of public service employment is needed.

And the OECD has an opinion..

Meanwhile, OECD has forecast that the Irish economy will shrink by almost 10% this year, one of the most pessimistic predictions so far.

The body also expects a further fall of 1.5% next year.

Its economic outlook says the Irish economy is experiencing a 'severe' contraction, and will recover only at a slow pace in 2010.

The OECD says substantial spending cuts and increases in tax will be needed in the coming years because of the severe pressure on the public finances.

Wonder what is the opinion of the public sector cheerleaders to this accurate bit "Generous rises in public sector wages pushed up wages elsewhere making Ireland less competitive."

Reduce the public sector wage bill(esp HSE admins) and welfare to help drag the country out of this depression.

FF say the report is fair which is surprising from them, perhaps its a way of saying sorry for leading the country on the path to years of misery if not bankruptcy down the road?

ixoy

I did gain a bit of dry amusement from the OECD's angle. After constantly hearing some PS/CS employees saying "We never saw the Celtic Tiger" and "We didn't cause this, the banks did" - seems the OECD think they kinda did cause it. Schadenfreude would be funnier if it hasn't screwed up entirely.

solice

Que Jimmy!


I just hope the govt. takes to heart what is being said and actually takes significant steps in the next budget.

Do you think the budget should be brought forward?

paddyland

Bertie, Bertie, Bertie, Bertie, Bertie...

Never let it be forgotten.

zootroid

gurramok wrote: »

FF say the report is fair which is surprising from them, perhaps its a way of saying sorry for leading the country on the path to years of misery if not bankruptcy down the road?

This is as close as we'll ever get to an apology from FF for mishandling the economy. Sorry isn't in their vocabulary, as saying so would be admitting how much of a mess they made.

ixoy

Actually shouldn't Cowen be telling the IMF to go kill themselves? After all, that's the FF response to people reacting badly to their economic plans.

I mean Lenihan broadly agreed but did he say he'd do anything about their points - about how PS/CS pay or public spending or higher taxes? I mean they're in government with a party who now seems to want to remove the levy and re-introduce the double Christmas bonus...

gurramok

They won't be saying 'go kill themselves' if the country has to call in the IMF

I never got a Xmas bonus and never had for a few years, why should people who don't work get one?

jank

gurramok wrote: »

They won't be saying 'go kill themselves' if the country has to call in the IMF

I never got a Xmas bonus and never had for a few years, why should people who don't work get one?

Because we have a culture of entitlement....

Riskymove

ixoy wrote: »

- seems the OECD think they kinda did cause it.

the Public service did not cause it, bad economic handling by Government did (including the level of pay increases given, particularly benchmarking)

the real issue is not just about pay level, its about reform of certain areas which is vitally needed...starting with HSE

Riskymove

solice wrote: »

I just hope the govt. takes to heart what is being said and actually takes significant steps in the next budget.

Do you think the budget should be brought forward?

no need for a budget for expenditure cuts, many processes are already underway

I hear An Bord Snip Nua report due this week, was probably waiting for this OECD report as cover

ceret

ixoy wrote: »

I did gain a bit of dry amusement from the OECD's angle. After constantly hearing some PS/CS employees saying "We never saw the Celtic Tiger" and "We didn't cause this, the banks did" - seems the OECD think they kinda did cause it. Schadenfreude would be funnier if it hasn't screwed up entirely.

Anyone got a link to this OECD report?

BroomBurner

A lot of hot air as usual.

The Public Sector wage bill rose in line with inflation, not before it. The PS did not drive the cost of living up.

If they want to reduce the number of people employed by the public sector, then have OECD and IMF given a way to go about this? Or do they just like pointing fingers, which is easily done (as previous poster said, cue jimmmy).

By all means, cut the paybill, but by removing people who are not showing enough care, attention and professionalism in their job and not representing value for money. Also, cut (where possible) public sector contracts with private sector firms and use in-house expertise instead.

Liam Byrne

zootroid wrote: »

This is as close as we'll ever get to an apology from FF for mishandling the economy. Sorry isn't in their vocabulary, as saying so would be admitting how much of a mess they made.

Apparently (according to today's lunchtime news) they've WELCOMED it, claiming that it backs up that they're "doing things right"; and (again!) they've refused to accept the fact that it points out that they're the ones that screwed us up!

If it were an episode of "Yes, Minister" it'd be funny.

Replace one of the Brians with Fr Dougal and he'd get more of a clue what was actually going on.....

Mr.Micro

Liam Byrne wrote: »

Apparently (according to today's lunchtime news) they've WELCOMED it, claiming that it backs up that they're "doing things right"; and (again!) they've refused to accept the fact that it points out that they're the ones that screwed us up!

If it were an episode of "Yes, Minister" it'd be funny.

Replace one of the Brians with Fr Dougal and he'd get more of a clue what was actually going on.....

Well what can Biffo and Lenihan say they would not know the first thing about economics. I will bet that they do not even understand the report hence they agree that its fair. They are hardly in a position to say its wrong as the state of our economy proves the report is probably spot on.

Het-Field

Liam Byrne wrote: »

Apparently (according to today's lunchtime news) they've WELCOMED it, claiming that it backs up that they're "doing things right"; and (again!) they've refused to accept the fact that it points out that they're the ones that screwed us up!

If it were an episode of "Yes, Minister" it'd be funny.

Replace one of the Brians with Fr Dougal and he'd get more of a clue what was actually going on.....

Only FF in their current incarnation could be this dillusional. An OCED report published yesterday claimed that our economy may contract by up to 25% by the end of next year. Unemployment is equally considered to be on the cusp of hitting 12%

As far as im concerned this report ensures a make or break situation for FF t the next budget. They have no alternative but to engage in robust spending cuts. Naturally that will piss many people off, but FF will HAVE to do it.

Liam has also accurately pointed out that the report states in black and white the responsibility of the current administration for the crisis. Amazingly, the period of Bertie/Biffo economics (2004-2008) has been identified as the most lackluster time in terms of sound economic management. No longer can they use the line "international factors..(supplementing that with)..."we are doing the right things".

Like the EU Commission's report, they have blown it out of proportion. It is not a proper endorsement, and there is no clear display that it will effect recovery. NAMA has been praised, but with heavy provisos, and caveats. As I have said, this report places a heavy onus on FF to deliver properly at the next budget.

Sleepy

BroomBurner wrote: »

The Public Sector wage bill rose in line with inflation, not before it. The PS did not drive the cost of living up.

Increase in numbers of PS workers = Increased number of people with money to spend = increase in inflation = increased salary demands from those in PS...

Salary levels are not the only cause of an increase in a wage bill. Even if an organisation has every member of management and staff on minimum wage it's wage bill can be excessive if too many people are hired.

solice

Sleepy wrote: »

Increase in numbers of PS workers = Increased number of people with money to spend = increase in inflation = increased salary demands from those in PS...

Not all inflation is bad, inflation is a positive aspect of an economy as long as it is controlled. Its the control thing that the govt. failed on

Sleepy

Oh, I know that, I was just pointing out the flaw in BroomBurner's statement that an increased wage bill in the PS was in relation to rising inflation when it was largely caused by the creation of multitudes of quangos to help ministers disassociate themselves from the problems of their portfolios and the throwing of money at problems in areas where structural changes were required more than higher budgets...

sbsquarepants

One of the major problems with this economy (in my opinion) is you can get far too much for sitting on your arse and contributiong nothing. I know a lot of people have found themselves on the dole recently, through no fault of their own and of course they should be helped as much as possible, however we all know people who have no intention of ever getting a job (or at least a legit, tax paying job). My proposal is this, you find yourself on the dole for whatever reason and you get well payed so as not to have a huge sudden drop in your standard of living, but after 6 months or so it reduces, 6 months more it reduces some more, untill after say 3 or 4 years you're basically being given food. Any of us could find ourselves out of work and especially in this climate, find it hard to find another job, but the amounts of money being paid out on the dole allows people to be way too fusy. There are jobs out there, people just wont do them cos they get paid as much, if not more, to watch judge judy and drink tea. It's a no brainer and we the tax payer are funding it. I for one have a major problem supporting spongers, junkies and so on from the money i drag my arse out of bed every day to earn.

solice

sbsquarepants wrote: »

One of the major problems with this economy (in my opinion) is you can get far too much for sitting on your arse and contributiong nothing. I know a lot of people have found themselves on the dole recently, through no fault of their own and of course they should be helped as much as possible, however we all know people who have no intention of ever getting a job (or at least a legit, tax paying job). My proposal is this, you find yourself on the dole for whatever reason and you get well payed so as not to have a huge sudden drop in your standard of living, but after 6 months or so it reduces, 6 months more it reduces some more, untill after say 3 or 4 years you're basically being given food. Any of us could find ourselves out of work and especially in this climate, find it hard to find another job, but the amounts of money being paid out on the dole allows people to be way too fusy. There are jobs out there, people just wont do them cos they get paid as much, if not more, to watch judge judy and drink tea. It's a no brainer and we the tax payer are funding it. I for one have a major problem supporting spongers, junkies and so on from the money i drag my arse out of bed every day to earn.

You and Sarkosy would be friends

I kind of agree with you but the problem is, a builder, 23 years old, laid off 6 months ago. Little or no experience in anything else, little experience in building. He is going to find it very difficult to find a job, not just at the moment but also in a year, 2 years or maybe even 3, 4 or 5 years.

I know that is a specific case but im sure there are many specific cases out there that would end up adding to a sizeable minority

Riskymove

solice wrote: »

You and Sarkosy would be friends

I kind of agree with you but the problem is, a builder, 23 years old, laid off 6 months ago. Little or no experience in anything else, little experience in building. He is going to find it very difficult to find a job, not just at the moment but also in a year, 2 years or maybe even 3, 4 or 5 years.

I know that is a specific case but im sure there are many specific cases out there that would end up adding to a sizeable minority

agreed..... that sort of plan only really works when you are in the kind of "full employment" situation we used to have

if there are no jobs and growing unemployment what can you do?

sbsquarepants

I honestly think it's a vicious circle, with people not taking jobs that they may well feel are beneath them or whatever, it will take the economy much longer to recover. far better in my opinion to have people stacking shelves or cleaning parks or whatever it may be, earning more than on the dole and therefore spending more, plus contributing to the tax take rather than syphoning money out endlessly. I know this is hardly an ideal situation for a qualified tradesman but at least he'd be doing something to support himself rather than being a burden and in so doing would be hastening the return of the days when we might hopefully need more builders are he could go back to it then. I know that's simplistic but economies are simple creatures. Work = good, no work = bad. It doesn't get much more basic than that.

ronano

Maybe i'm wrong and there are jobs out there but really myself and any friends if we could get ANY job we would be taking it. No question of it being beneath us,employment no matter how supposedly crapola is better than wasting your time/life on the dole.

I entirely agree with the point that social welfare system needs an overhaul,more oversight,more attempts at offering retraining and perhaps a sliding scale depending on circumstances. We need to be more like the british system but with more a heart i guess

SLUSK

solice: All inflation is bad period. Your money losing value is bad. Inflation is a tax that redistributes wealth from savers to borrowers. People who borrowed to much money do not deserved to be subsidized via the inflation tax. in case I have not made myself clear, inflation = taxation.

Sand

solice: All inflation is bad period. Your money losing value is bad. Inflation is a tax that redistributes wealth from savers to borrowers. People who borrowed to much money do not deserved to be subsidized via the inflation tax. in case I have not made myself clear, inflation = taxation.

Uh, Ireland has a lot of borrowers. Probably more borrowers than savers.

Just saying...

SLUSK

Sand wrote: »

Uh, Ireland has a lot of borrowers. Probably me borrowers than savers.

Just saying...

So what? Why should the responsible people who saved their money and did not go crazy buying flashy cars and going on expensive holidays subsidize the people who acted like children and spent all their money? Rewarding this kind of bad behavior will only encourage more reckless borrowing in the future.

Senna

As said at the top of this thread, the property bubble fueled this whole mess. All wages (including PS/CS) were increases due to the enormous property price rises, pushing up inflation and so making the country completely uncompetitive. FF knew what was happening, as early as 2001 the central bank was telling them the market was over inflated, but what did they do? they offered intensive after intensive to buy property. Nearly all of Irelands current troubles lies with FF's cozy relationships, lining the pockets of the rich and indebting an entire generation.

The only way (that i can see) out of this mess is something we cant do, inflate our way out of this, yes it would penalise the saver and rewards the over leveraged, But really, we cant blame people for making stupid pre 2006 purchases, the elected gov (and media) were advocating it and the average person doesn't need much more encouragement than that to spend money.

solice

SLUSK wrote: »

solice: All inflation is bad period. Your money losing value is bad. Inflation is a tax that redistributes wealth from savers to borrowers. People who borrowed to much money do not deserved to be subsidized via the inflation tax. in case I have not made myself clear, inflation = taxation.

Controlled inflation helps an economy grow, effectively increasing prices will result in increased salaries and a growing quality of life. Its perfectly understandable to think that inflation is bad, we suffered from really bad inflation in Ireland for a number of years, it was not controlled, in fact it was fuelled by govt. incompetence and peoples greed. But controlled inflation of 1% or 2% can be a very good thing for a country.

thebman

Senna wrote: »

As said at the top of this thread, the property bubble fueled this whole mess. All wages (including PS/CS) were increases due to the enormous property price rises, pushing up inflation and so making the country completely uncompetitive. FF knew what was happening, as early as 2001 the central bank was telling them the market was over inflated, but what did they do? they offered intensive after intensive to buy property. Nearly all of Irelands current troubles lies with FF's cozy relationships, lining the pockets of the rich and indebting an entire generation.

The only way (that i can see) out of this mess is something we cant do, inflate our way out of this, yes it would penalise the saver and rewards the over leveraged, But really, we cant blame people for making stupid pre 2006 purchases, the elected gov (and media) were advocating it and the average person doesn't need much more encouragement than that to spend money.

It is so obvious really

FF/PD/Green/Independants, lots of people to blame for seeing it and not doing anything and the opposition for not calling them out on it and the media for same.

No real highlighting of the problems was done and promoted in any serious way that would grab peoples attention.

Spudmonkey

Senna wrote: »

The only way (that i can see) out of this mess is something we cant do, inflate our way out of this, yes it would penalise the saver and rewards the over leveraged, But really, we cant blame people for making stupid pre 2006 purchases, the elected gov (and media) were advocating it and the average person doesn't need much more encouragement than that to spend money.

I have saved my ass off for the last three years and I should be screwed over the fact some people were buying left, right and centre?

I never gave into buying a flashy new car, buying a house, going on three holidays a year. I just saved for the rainy day, a mentality I got off my parents. What a way to reward the careful ones, the ones who didn't get us into this mess!

Thank god we joined the euro anyway is all I'll say!

Senna

I agree, i was going to buy in 2005 and realised it was madness, thank god i didn't. But we do need to look at the bigger picture, this isn't a short term problem, it will cripple the economy for decades.
Ireland needs to be competitive, our unemployment figures will only rise until that happens, we need inflation and wage deflation together to get us out of this mess.
How it's going to happen, i dont know.